HISD likely to keep $51M following state lawsuit victory

In this August file photo, TEA Commissioner Mike Morath discussed the 2017-2018 accountability ratings in the library of Glenda Dawson High School in Pearland ISD.

Photo: Steve Gonzales, Staff photographer / Houston Chronicle

Houston ISD likely will keep an additional tens of millions of dollars more in property tax revenues each year following a widely expected Texas appeals court decision Friday.

Judges from the state's 3rd District Court of Appeals ruled against two small school districts and a nonprofit that sued the Texas Education Agency over its re-interpretation of statutes related to "recapture," the state's method of redistributing tax revenues from property-wealthy districts to property-poor districts. The ruling means that property-wealthy districts, such as HISD, will face lower "recapture" payments back to the state moving forward.

HISD officials projected the ruling would result in the district keeping an additional $51 million in 2018-19. District leaders expected the Texas Education Agency to win the lawsuit, so the already factored the $51 million in revenue into the current budget. As a result, the district will not see a windfall that can be spent on additional costs.

The plaintiffs alleged the Texas Education Agency improperly re-interpreted state law to include optional property tax homestead exemptions into "recapture" calculations for districts with wealthy property tax bases relative to their student enrollment totals.

A district court judge granted a temporary injunction in favor of the plaintiffs. However, the appellate court found the plaintiffs could not prove they were harmed by the re-interpretation because it did not cause a shortfall in the state's Foundation School Program, the fund through which state money is distributed to school districts.

The lawsuit was filed by La Feria ISD, located in the Rio Grande Valley; Joaquin ISD, located in East Texas; and The Equity Center, a nonprofit that advocates on behalf of about 600 Texas school districts. The plaintiffs argued that the change in legal interpretation would cost school districts receiving "recapture" funds about $440 million per year.

Several Houston-area districts send local property tax revenue to the state through "recapture," including Spring Branch, Galveston, Brazosport and Barbers Hill ISDs.

Jacob Carpenter joined the Houston Chronicle in June 2017 to cover K-12 education. Prior to arriving in Texas, he spent a year as an investigative reporting fellow for the Milwaukee Journal Sentinel. He reported for the Naples (Fla.) Daily News from 2011 to 2016, covering criminal courts and long-term investigative projects. A native of suburban Detroit, he graduated from Michigan State University in 2010.